Look for Market Treasures in Overlooked Places
In the last couple posts we looked at how we can swing trade slower timeframe charts without having our trading take over our lives. With this example, I wanted to show you how you can use the same principals to swing trade stocks, ETFs and options.
Check out this example of GOOG. This is a great trading stock but at $775 per share (or there about), it is out of reach to many traders. With the CPT, you can use the trade setups you see on the chart to trade options. The entry tells you what strike price to buy; something slightly in the money with enough time remaining. At each target, you could exit a part of your position. When it’s a long trade you buy slightly in the money call options. When it’s a short trade, you merely buy slightly in the money put options. Sometimes a trade will take a loss so if it does happen to hit its stop, you sell your option and recapture some of your premium. We never hold options to expiration. There’s no reason to do that. Like this, you can contain your risk and enhance your risk:reward ratios.
This example is a unique 195 minute chart using ‘natural hours’ instead of session hours. What makes this chart so different is that if you use session hours, you basically are dividing the session by two, giving you two bars per session. You can certainly use a chart like that and get twice the frequency as a daily chart would give you. Using Natural Hours, as with this chart example, you actually get 3 bars. The first bar is only 15 minutes, so at 9:45 am, you look to take trades. The 2nd bar is 195 minutes and the 3rd bar is 180 minutes (the remainder of the first 15 minute bar. Different, right? We like to be different.
Look to take trades on this GOOG chart 15 minutes after the market opens. But slightly in the money calls and puts with enough time (1 month is about right, give or take) and then scale out at each target for double and triple digit percentage gains.
There are many advantages of using this type of chart. The most obvious is that you let the market settle in for 15 minutes before placing trades. Also, you can get your trading done quickly, with a brief ‘snap shot’ window of time. Also, we don’t want to do what everyone else is doing. We want to go our own way and find our treasure under the stones that everyone else is overlooking.
The Counter Punch Trader will be on the market again soon. Be on the lookout. We will be announcing how you can register for the next upcoming webinars here on this blog very soon.